How to Create a Forex Trading Robot [in 3 Easy Steps] (2024)

Many traders have no clue how to create a forex trading robot. However, having a forex trading bot is a great way to capitalize on market opportunities without human emotions or having to do the analysis yourself.

Creating a forex trading robot is not just sending instructions to the programmer to code a crossover strategy or a bounce on a trendline. It entails a lot more than this. This article goes deeper into how to create a forex trading robot.

What is a Forex Trading Robot?

A forex trading robot is software that automatically enters and exits trades in the forex market based on a chosen trading strategy. The forex robot is simply an encoded forex trading strategy built to work as an automated trading system that can execute trades on your behalf.

Can You Create a Forex Trading Robot Without Programming Skills?

It is possible to create a forex trading robot without programming skills. Many websites present templates for constructing simple, easy-to-use forex robots without having to write any line of code.

But you must understand that the entire process is not just building a robot. It is about building a robot to make money in the forex market. When trading real money, there is little room for trial and error.

You may be able to create a forex robot without programming skills, but how many of these are eventually profitable consistently? How many of these are market-prudent, can identify price inefficiencies in the forex market consistently, and profit from these inefficiencies?

Not many.

How is a Forex Trading Robot Structured?

A forex robot simply automates an algorithmic trading strategy using code. Every trading strategy is made up of three components:

• Entries
• Exits
• Position size

These three components must be captured in the code for the trading bot to profit from the targeted price inefficiency setup.

How Do Forex Robots Incorporate Trading Strategies Into Their Codes?

The Forex robot code has four main parts:

• Setup: Contains the administrative components of the EA’s code
• Init (initialize): all code here runs once when executed. This is where you include the code and comments for chart graphics, such as price information.
• Deinit (deinitialize): All code here runs once the robot is stopped.
• Start: All code here runs once, but only when there is a new piece of information, such as a new price tick. The Start part encodes the three components of entry, exit, and sizing. For example, a script is a code that runs once. Therefore, a script code will go into the Start function. Any code meant to run once is usually entered between the angle brackets (curly brackets or {}). Execution of the script will cause this code to run once.

This snapshot shows what is captured in the Init section of the code. The chart displays some price information, and the init code is placed below it.

Snapshot of an MT5 chart showing a graphic

//+------------------------------------------------------------------+//| Custom indicator initialization function |//+------------------------------------------------------------------+int OnInit() {//--- indicator buffers mapping chart_Id=ChartID();//--- //-- font_ohlc=FontsModel(Fonts_Model); wind_color=WindColors;//--- //-- iname="DayPivotPoint ("+TF2Str(Period())+")"; IndicatorSetString(INDICATOR_SHORTNAME,iname+"_("+Symbol()+")"); IndicatorSetInteger(INDICATOR_DIGITS,Digits()); //-- _model=FontsModel(Fonts_Model); drawpivot=false; drawpohl=false; prvtmp=iTime(Symbol(),0,1); prvtmo=iTime(Symbol(),0,1); //-- HandleEMA2=iMA(Symbol(),0,2,0,MODE_EMA,PRICE_MEDIAN); if(HandleEMA2==INVALID_HANDLE) { printf("Error creating EMA2 indicator for ",Symbol()); return(INIT_FAILED); }//--- return(INIT_SUCCEEDED); }//---------//

Init code of the chart graphic in the MT5 snapshot is shown above

After reading the Init component, the code will check for potential exits on active trades and then look for new entries. If a new entry is identified, it will look at setting a position size according to the proposed risk management principles. The code repeats this process every time the asset forms a new price tick.

When the Forex robot is stopped or reaches its profit target, the Deinit code kicks in. This code could remove the chart graphic or clear a trade count timer.

How to Create a Forex Trading Robot in 3 Steps?

What are the steps to follow when creating your own forex robot? In undertaking the development of a forex trading robot, you have to adopt a stepwise process. You do not just get a programmer to start creating a robot. There are steps you have to follow, and the important ones are done even before actual development takes place.

Step 1: Conduct your initial research

The first step in the process of how to create forex robots is to conduct your research. What does this mean?

You need to identify what strategies will work, scrutinize the idea, and adopt a simple approach to bringing these automated trading systems to life. When we talk of types of trading systems or strategies as part of the initial research, we need to identify what strategy we want to pursue.

• Is the strategy based on market direction, i.e., is it one to follow the up-down movements of the market (trend-following or directional strategies)?
• Is it a market-neutral strategy (used in consolidating or range-bound markets), or is it one based on taking opposing directions on inversely correlated assets (e.g., going long on oil and shorting the Japanese Yen at the same time)?

For currency markets, the strategy commonly used to develop forex trading bots is directional. The forex bot goes long or short, depending on where the market moves.

Another aspect of research is to check to see if the strategy’s performance will be affected by the news, fundamentals, or other market microstructural factors. Users of forex trading robots should be aware that there are many sources of market inefficiencies, with the economic news being the number one source of such inefficiencies.

Most of the big moves in the markets are driven by the banks, and this is where attempts are made to align a strategy with those of the big banks. Please note that it is also possible for a forex bot to trade these inefficiencies profitably.

For instance, if an expert advisor tracks two currency pairs on different trading platforms and notices a price inefficiency, a forex trading robot can be designed to trade along these lines to deliver profit. Market inefficiency could also be of a technical origin. For instance, the divergence strategy, which deploys momentum indicators, is an example of an attempt to profit from an initial price inefficiency that eventually corrects itself.

Step 2: Scrutinize the Idea for the Strategy

The whole idea of creating a forex bot is for it to be able to identify potential inefficiencies in price that have identifiable causes in a repeated and sustainable manner. The trading idea or strategy must answer the following questions:

• Is it a market-prudent strategy?
• Can it identify persistent points of price inefficiency, and if yes, does the strategy have the ability to identify these price inefficiencies persistently or just a few times?
• Do these price inefficiencies have an identifiable cause?

For instance, if a forex trading bot is built to trade a specific kind of response from a particular news release (e.g., to buy gold if US consumer price index figures are below a specific standard deviation below the consensus number), this is a scenario where the price inefficiency that occurs after the news is released is market-prudent and has an identifiable cause.

It is a market-prudent strategy because it makes sense from an economic/fundamental point of view. It can be persistently done because the US CPI figures follow a monthly schedule and are recurring. The forex trading robot’s response to buy gold if the US consumer price index falls by a minimum of 2 percentage points below the consensus figure would be a quantifiable response.

Similarly, an expert advisor created to identify and trade divergence setups when a momentum indicator is in the overbought or oversold price areas is another example where there is an identifiable cause for the price inefficiency that an EA can exploit on an ongoing and consistent basis. The same goes for when an EA is built to buy into the retracement that occurs in a continuation pattern, such as a flag, pennant, or triangle.

Step 3: Simplicity

Keeping the trading robot’s job as simple as possible is essential. A simple BUY or SELL response, a directional form of trading, works very well for the currency markets. There is no need to try using a robot to conjure complex trade scenarios or trade types as found in the options markets. Remember, the lesson on creating a forex robot is for retail traders and should be simple, inexpensive, and clear.

After performing this three-step process, you are ready with a trading strategy to create the forex trading robot.

How Do You Write Code for a Forex Trading Robot?

All code for a forex robot on MetaTrader revolves around these four essential blocks:

• Syntax: This is where the code for comments, format, and identifiers is input.
• Variables and datatypes are the basic blocks on which the EA code is built. They are objects that can be assigned a value.
• Expressions and operations: A sequence of operations or operand symbols or a program record where data types characterize a program record’s value. MetaTrader recognizes seven types of operations.
• Conditionals: also known as the “if-else” code, the code tells the EA to perform another function if an expression or function is executed or fails to be executed. In other words, this code tells the EA: “if not one, perform the other.”

Generally speaking, writing code for a forex trading robot is one of the three types of code that can be written in the MQL4 or MQL5 environment. The other two are codes for custom indicators and codes for scripts.

The difference between writing code for a forex trading robot and that of a custom indicator or a script is that forex trading robots are built to process and execute a function (scripts do not do this) and trade automatically (custom indicators cannot do this). Therefore, writing a code for a forex robot for algo trading is more encompassing.

So, how do you write code for a forex trading robot? First, you must understand what the robot’s code is intended to do.

An expert advisor is linked to an asset’s chart and must be able to analyze this chart and automatically generate trades. Therefore, a trading bot must be able to perform a series of events not just once but repeatedly when conditions for these are fulfilled.

The code for a trading bot must capture a sequence of events, such as initialization, deinitialization, and other events that capture changes in market conditions, such as a change in volume or alteration of the depth of market conditions. These will manifest on the trader’s front end as long or short orders opening and closing.

How to Write a Forex Trading Robot Code in MT4

To create a forex trading robot in MT4, you must first open the MQL4 coding environment. You can do this by pressing the F4 button on your PC when the trading platform is running. This takes you immediately to the MetaEditor environment for MT4. When you click “New,” you are presented with a dialog box to choose the object for which you will write the code. Here, you choose “Expert Advisor (template).”

Details of how to write code for the MT4 forex robots will be presented in a subsequent article.

How to Write a Forex Trading Robot Code in MT5

To create a Forex trading robot in MT5, you must first open the MetaEditor MQL5 coding environment. You can do this by pressing the F4 button on your PC when the MT5 platform is running. When you open your MetaEditor environment, you will be asked to identify what you want to create. You will see a pop-up that looks like this:

Select the “Expert Advisor (generate)” option to start. Can you notice any differences in both snapshots? The details of how to write code for the MT5 trading platform will be discussed in a subsequent article.

How Do You Test Your Forex Trading Robot?

Now that you have written your code for the Forex trading robot, it is time to test the performance of what you have written against historical price data. This is what is known as backtesting.

What is the aim of backtesting your robot? Backtesting helps you to gauge the accuracy of your Forex robot. It also helps you understand your Forex robot’s performance since backtesting uses historical data and performance metrics for this purpose. It also helps you understand if your robot is ultimately suitable as a tool for the detection and profitable exploitation of price inefficiencies. Let us discuss each of these points individually.

1. Forex robot accuracy

You check to see if the code and the trades match. You want to see that the code is opening and closing the trades as intended.

2. Understanding forex robot performance

You should be backtesting on every tick. Scrutinize the data to see which price ticks are more relevant to your strategy so that you can tweak the code appropriately.

3. Understanding forex robot market suitability

Understanding your forex robot requires looking at how the robot will perform under various market conditions, time frames, across various assets or currency pairs, and during certain seasons. In other words, you should seek the answers to the following questions:

• Is the robot a better performer in the London or New York time zone?
• Is the trading bot better suited for trading off hourly or long-term time frames?
• What currency pairs or market assets deliver better returns when traded with the Forex robot?
• Is there seasonal performance variation? For instance, does the robot’s performance improve or wane when hurricanes threaten the US Gulf Coast and oil production with attendant effects on oil, the Canadian Dollar, the US Dollar, and correlated assets?
• Are there unexpected events that will impact the Forex bot’s performance?
• Does the robot’s performance in price-efficient conditions ensure the survival of the trader’s account? In other words, does the robot pass tests of risk management?

How Do You Optimize Your Forex Trading Bot?

After backtests, it is time to optimize your trading robot. Optimization in forex trading is a process of varying several rules, parameters, and values of a forex trading robot to get the best performance out of your automated trading system.

Why is it necessary to optimize a robot? We optimize our forex trading robots to better adapt to market conditions and maximize their performance.

Various performance metrics are targeted in an optimization process, even though the most common ones backtests tend to target are the net profit (profits-losses). A performance metric is known as an objective function.

An example of optimizing a forex robot’s objective function may be swapping a simple moving average for an exponential moving average or changing the moving average’s period. A trader may find out after backtests performed using a Simple or Exponential Moving Average that the EMA produces a higher net profit for the same period than the SMA. In this case, the EMA would represent the optimized value or parameter for the strategy.

In practice, optimization processes are more complex. They are more complex and will demand further exploration.

What Programming Languages Can I Write Forex Robot Codes In?

As far as the coding for creating trading robots is concerned, the popular languages used are MQL4 (for the MT4 trading platform), C# (for MT5), and Python (for more complex algos). Other less popular languages are Pinescript (Tradingview) and Lua (TradeStation and NinjaTrader). After coding, you must source and clean up the data for backtesting and optimization.

Whatever language is used, your position sizing must reflect proper risk management. Risks could come from the market (market risk) or from sources outside the market (operational risk), such as poor internet connectivity, counterparty risks, and system failures (if using an overloaded Forex virtual private server).

How is a Forex robot structured? The code of a Forex robot must capture the entry, exit, and position sizing parameters.

Conclusion

Don’t forget. Building a forex bot is beyond just the lines of code. It involves a lot of research, backtesting, and optimizing. While some traders would rather go through the route of using no-code-trading bot-building websites, know that this won’t give you as much control over your bot as you may need. If you build your bot yourself, however, you can control and determine every single bit of data.